By Selwyn Duke

What has lifted more people out of poverty, charity or
economic freedom? It’s not even close.

Charity is wonderful, and I’ll be the first to say we have
an obligation to share our gifts, be they material, intellectual or talent
oriented. Yet whether our redistributionist endeavor is charity — and charity
is voluntary redistribution — or the less noble, coercive, outsourcing of
charity known as government programs, there first must be wealth to
redistribute. But where does wealth come from?

If we go back to biblical times and beyond, a man might be
considered wealthy if he had 70 goats. In point of fact, the standard for
wealth was so different that the US’s average middle-class person today — with
his car, TVs, computer, refrigerator and many other luxuries — would have been
considered wealthy for most of history. And our average “poor” man, who also
usually has an old car and various creature comforts, likewise has a material
lifestyle that would have been the envy of our forebears. The reason for this
is simple: there is far, far more wealth in the world now than in ages past.

The first lesson this teaches is that wealth can be created.
This happens when people find more efficient ways of raising livestock (so 70
goats becomes small potatoes) and growing crops, and when they extract raw
materials from the Earth and use them to create the manifold necessities and luxuries
we enjoy. In a word, it happens when people produce,
which is why economists and businessmen will measure productivity. And how will
people be encouraged to produce?

They must have an incentive, and this is where the profit
motive comes into play. Ah, the much maligned profit motive. Let’s talk about
that.

There are two extremes with respect to the profit motive.
One is typified by some libertarian Ayn Rand acolytes who seem to treat it as
the highest motivation; the other is far more prevalent today and is
represented by another brand of “libs,” people who behave as if profit is
something dirty (at least other people’s profit, anyway). But the balanced view
is a bit different.

There is another kind of incentive. In America’s early
Christian communes, for instance, residents’ belief that they were doing God’s
will — and perhaps winning His favor — served as a great incentive to be
productive; thus did the communal Oneida Colony create renowned flatware. And,
truth be known, there’d be no need for profit if we lived in a sinless world,
for there would be neither covetousness nor laziness. If there was an
unfulfilled need — paper products, for example — people would readily volunteer
to create them simply to serve others, and no one would be wasteful or
undermine the system by taking more of anything than he needed. But in a
sinless world we wouldn’t need a military, police or prisons, either.

Sane people live in the real world, however, where different
rules apply. One of them is that since the spiritual/moral motive is the
highest reason to serve your fellow man, it is also the rarest. And because of
this, it cannot be relied upon to motivate people at the level of population.
Enter the profit motive. To paraphrase economist Walter Williams, profit
encourages your fellow man to serve you even if he doesn’t give a darn about
you. After all, Domino’s didn’t start making pizza to relieve hunger; Ivory
doesn’t make soap because “Cleanliness is next to godliness.” To have your
needs and wants satisfied, would you rather rely on the charity of your fellow
man or his profit-driven self-interest? For the answer, just look at all the
wonders of science and medicine, all the luxuries around you, and ponder what
percentage of them were created based on charitable motives versus the profit
motive. Again, charity is wonderful — but it’s also relatively rare. 

Of course, we should all strive to make it less rare in
ourselves. But the lesson here is this: to minimize the profit motive
personally is virtuous; to minimize it in public policy is vice. The motivation
to serve others for a higher reason must come from within; a bureaucrat can
decide to eliminate the profit motive via regulation, but he cannot replace it
in the hearts and minds of the people with a more ethereal purpose. And this should
be very easy for the bureaucrat to understand. Would he — or anyone else who
sneers at profit — do his job for free? Precious few of us would. In fact, research
has shown that those who protest the profit motive most are most driven by
it (the likely explanation? Projection).

In fact, unnecessarily reducing the profit motive in
civilization is evil. This is because productivity in a nation — which means
wealth creation — will generally (at least) be proportional to the degree of
profit to be had. Thus, a person who institutes unjust profit-reducers such as
excessive taxes and regulations is a policy poverty pimp who can literally rob
his society of billions in prosperity. A thief in an alley is less to be
feared. 

The fact that wealth is created teaches other lessons as
well. For example, class-warfare demagogues encourage the notion that the poor
have less because the rich have more. But unless the wealth has been stolen (which
does happen; e.g., Bernie Madoff), this is utter nonsense. Consider: would it
have made even one poor person richer if Microsoft’s Bill Gates hadn’t pursued
his dreams and made his billions? It would in fact have made people poorer, as we wouldn’t have the jobs and
productivity-enhancing products he created.

So how can nations become as prosperous as the culture and
character of their people allow? There must be a powerful profit motive so that
people produce as much wealth as possible. And there is a prerequisite for
this: great economic freedom (most still call this “capitalism,” a grave mistake
because the term was originated by socialists).

How important is this factor? In “Self-Inflicted Poverty,”
Dr. Walter Williams points
out that there is an extremely strong correlation between a nation’s level
of economic freedom and its level of prosperity. He asks “Why is it that
Egyptians do well in the U.S. but not Egypt?” After pointing out that the same
could be said of others from poor nations who immigrate to the US, he points
out that Egyptians are smothered with regulations and corruption. Providing one
damning example, he writes, “To get legal title to a vacant piece of land would
take more than 10 years of dealing with red tape. To do business in Egypt, an
aspiring poor entrepreneur would have to deal with 56 government agencies and repetitive
government inspections.” The result is that Egypt’s mummies have more life than
its economy.

Given how important economic freedom is, we should note how
it’s lost: through lack of appreciation. After all, cease to value something,
and you may not preserve it — demonize it enough, and you’ll surely destroy it.

When appearing on a radio show some years ago on the heels
of the financial crisis, the first question the host asked me was why economic
freedom (she said “capitalism”) had failed. Her attitude was a staggering
tribute to a lack of perspective, a spirit of entitlement and the tendency to
count curses and not blessings.

Just walk into any American supermarket with the thousands
of products from the world over available at affordable prices, and tell me
economic freedom has failed. In fact, our whole modern world is a tribute to
economic freedom. And what of the financial crisis? Well, people will talk
about how it destroyed so many trillion dollars of wealth and place the blame on
economic freedom. But remember the time when 70 goats made you wealthy? We only
had trillions of dollars of wealth that could be destroyed to begin with
because of economic freedom! In fact, economic freedom has provided a climate
for such tremendous wealth creation that the trillions lost still represented
only a small percentage of all the wealth in existence. Our “failure” is
history’s raging success.

The problem here is that people tend to take what they have
for granted and view wealth in relative terms. But returning to what I said
about the poor, historically, being so meant that you didn’t have shoes on your
feet or food on the table (if you had a table). In America today it generally
means you have an older car, a TV, refrigerator, air conditioning and a host of
other luxuries. The reality? Our government’s “poverty line” is a political
ploy. In an absolute sense, there is very, very little poverty in the US —
because of economic freedom.

Our great discoveries, inventions and innovations were not
made by bureaucrats, nor generally at their direction. And while I encourage
and support the charitable endeavors of my Catholic Church (the world’s largest
private provider of aid to the poor), even its efforts to end poverty pale in
comparison to economic freedom’s triumphs. This is no slight. Economic freedom
unleashes the creative capacities of the common man, from border to border,
transforming the populace into an army of wealth creators. And nothing can
compete with that.

Without creation, there can be no distribution.   

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